Form 1040NR Checklist: Tax Year 2014
Year-Specific Context for 2014
The 2014 Form 1040NR uniquely incorporates the Affordable Care Act shared responsibility provision reconciliation via Form 8962, requiring nonresident aliens who received advance payments of premium tax credit to file Form 1040NR and reconcile.
The 2014 personal exemption amount is fixed at $3,950, subject to phase-out if the adjusted gross income exceeds the threshold limits specific to the filing status.
Nonresident filers retain restricted access to most credits available to residents. This tax year marks the first full implementation of the Affordable Care Act individual mandate, creating new filing obligations for nonresident aliens who obtained health insurance through the Marketplace with advance premium tax credit assistance.
Year-Specific Programs Applying to 2014 Form 1040NR
Two major tax provisions specifically affect 2014 Form 1040NR filers. First, advance premium tax credit reconciliation requires nonresident aliens who enrolled dependents or themselves in Marketplace coverage and received advance premium tax credit payments to file Form 1040NR and attach Form 8962 to reconcile excess payments or shortfalls, with the net premium tax credit or repayment amount reported on line 65.
Second, the Alternative Minimum Tax applies to nonresidents owing AMT, who must complete and file Form 6251 and report the calculated alternative minimum tax amount on line 43. These provisions represent significant compliance requirements that did not exist in prior tax years and require careful documentation of health insurance coverage and premium assistance received during the tax year.
Ten-Step Compliance Checklist for 2014 Form 1040NR
Step 1: Determine Residency Status
Confirm nonresident alien status under the Green Card Test or Substantial Presence Test. The Green Card Test establishes resident alien status if the individual was a lawful permanent resident of the United States at any time during the calendar year 2014. The Substantial Presence Test requires counting days of physical presence in the United States over three years: all days in 2014, one-third of days in 2013, and one-sixth of days in 2012, with the weighted total compared to the 183-day threshold.
If the Substantial Presence Test is met but a closer connection to a foreign country exists, file Form 8840 Statement for Closer Connection Exception to Resident Status with Form 1040NR. International students claiming a closer connection must fully complete Form 8840, documenting their tax home in a foreign country and demonstrating that they have closer ties to that country than to the United States throughout the tax year.
Step 2: Gather Income Documents
Collect all 2014 Forms W-2 Wage and Tax Statement showing wages, salaries, and tips received from U.S. employers; Forms 1042-S Foreign Person’s U.S. Source Income Subject to Withholding documenting scholarship and fellowship income and U.S.-source investment income; all Forms 1099 series, including 1099-INT for interest income, 1099-DIV for dividend income, 1099-MISC for miscellaneous income, and 1099-R for pension and annuity distributions; Schedule K-1 if a partner in a U.S. partnership or beneficiary of a U.S. estate or trust, and Form 1098-T Tuition Statement if claiming education credits.
Nonresidents must report all U.S.-source income and income effectively connected with U.S. trade or business activities. Verify that all forms contain accurate identifying information, including the correct spelling of the name and a valid Social Security Number or Individual Taxpayer Identification Number.
Step 3: Identify Effectively Connected Versus Non-Connected Income
Separate all income into two distinct categories: income effectively connected with U.S. trade or business, reported on page 1, lines 8 through 21, and non-effectively connected fixed or determinable annual or periodical income, reported on Schedule NEC on page 4. Effectively connected income is taxed at graduated rates using the same rate structure applicable to U.S. citizens and resident aliens, ranging from 10% to 39.6% depending on taxable income level.
Non-effectively connected income is taxed at flat rates of 30% or lower treaty rates, depending on the income type and provisions of applicable income tax treaties between the United States and the taxpayer’s country of residence. The distinction between these two income categories is fundamental to proper tax calculation and requires careful analysis of the source and nature of each income item.
Step 4: Complete Filing Status Box on Page 1
Select one box from boxes 1 through 6 only, as multiple selections are not permitted. Box 1 applies to single residents of Canada, Mexico, or single U.S. nationals. Box 2 applies to other single nonresident aliens. Box 3 applies to married residents of Canada, Mexico, or married U.S. nationals. Box 4 applies to married residents of South Korea.
Box 5 applies to other married nonresident aliens. Box 6 applies to a qualifying widow or widower with dependent children, available only to U.S. nationals or residents of Canada, Mexico, or South Korea.
Married nonresidents filing separately must use box five unless specific elections under Internal Revenue Code Section 6013(g) or (h) apply. Filing status selection determines applicable tax rates, exemption eligibility, and phase-out thresholds throughout the return.
Step 5: Claim Exemptions on Line 7 With 2014 Limits
On line 7a, claim yourself unless someone else can claim you as a dependent on their tax return. On line 7b, claim spouse only if the filing status box 3 or 4 applies, and the spouse had no U.S. gross income during 2014. On line 7c, claim dependents, noting that dependent exemptions are limited and generally available only to residents of Canada, Mexico, or South Korea, or to students and business apprentices from India under specific treaty provisions. On line 7d, calculate total exemptions by summing the number of exemptions claimed on lines 7a, 7b, and 7c.
The personal exemption deduction equals $3,950 per qualifying exemption, subject to phase-out if adjusted gross income exceeds $254,200 for single filers or $152,525 for married taxpayers filing separately. The exemption phase-out reduces the total exemption amount by 2% for each $2,500 or fraction thereof by which adjusted gross income exceeds the applicable threshold.
Step 6: Report Income on Lines 8 Through 21 and Complete Schedule NEC
On lines 8 through 21, report all effectively connected income including wages, salaries, and tips on line 8 with Forms W-2 attached; taxable interest on line 9a; ordinary dividends on line 10a and qualified dividends on line 10b; taxable refunds of state and local income taxes on line 11; scholarship and fellowship grants on line 12; business income or loss on line 13 with Schedule C or Schedule C-EZ attached; capital gains or losses on line 14 with Schedule D attached; other gains or losses on line 15 with Form 4797 attached; IRA distributions on line 16a with taxable amount on line 16b; pensions and annuities on line 17a with taxable amount on line 17b; rental real estate and partnership income on line 18 with Schedule E attached; farm income or loss on line 19 with Schedule F attached; unemployment compensation on line 20; and other income on line 21.
On line 22, enter treaty-exempt income from Schedule OI, Item L(1)(e). On line 23, calculate the total effectively connected income. On Schedule NEC on page 4, enter all non-effectively connected fixed or determinable annual or periodical income, including dividends not effectively connected, interest, royalties, annuities, and pensions, classifying each by applicable tax rate in columns (a) 10%, (b) 15%, © 30%, or (d) other specified rate.
Step 7: Complete Schedule A If Claiming Itemized Deductions
Nonresidents cannot claim the standard deduction available to U.S. citizens and resident aliens. If itemizing deductions, use Schedule A for Form 1040NR only; do not use Schedule A for Form 1040, as the schedules differ in structure and allowable deductions. Deductible items are limited to those allocated adequately to effectively connected income, including state and local income taxes, real estate taxes, personal property taxes, home mortgage interest on property used to produce effectively connected income, investment interest expense, gifts to U.S. charitable organizations, casualty and theft losses from federally declared disasters, and certain miscellaneous itemized deductions.
An itemized deduction limitation applies if adjusted gross income exceeds $254,200 for single filers, $152,525 for married taxpayers filing separately, or $305,050 for qualifying widow or widower status, requiring use of the Itemized Deductions Worksheet to calculate the reduced allowable deduction amount.
Step 8: Calculate Adjusted Gross Income and Taxable Income
On line 36, calculate adjusted gross income by subtracting the sum of lines 24 through 35, representing above-the-line deductions including educator expenses, certain business expenses of reservists and performing artists, health savings account deduction, moving costs, deductible part of self-employment tax, self-employed SEP and SIMPLE retirement plan contributions, self-employed health insurance deduction, penalty on early withdrawal of savings, alimony paid, IRA deduction, student loan interest deduction, tuition and fees deduction, and domestic production activities deduction, from line 23 total effectively connected income. Enter the adjusted gross income amount again on line 37.
On line 38, enter itemized deductions from Schedule A, line 15, or leave blank if not itemizing. On line 39, subtract line 38 from line 37. On line 40, calculate the exemption deduction by multiplying the number of exemptions on line 7d by $3,950, reducing this amount if the adjusted gross income phase-out applies. On line 41, calculate taxable income by subtracting line 40 from line 39, entering zero if the result is negative.
Step 9: Compute Tax, Apply Credits, and Add Schedule NEC Tax
On line 42, calculate tax on effectively connected income using the 2014 Tax Table or Tax Computation Worksheet provided in the Form 1040NR instructions, or complete Form 6251 Alternative Minimum Tax if the alternative minimum tax applies. On lines 43 through 52, calculate alternative minimum tax if applicable and claim allowable credits, noting that child tax credit is available only if the nonresident is from Canada, Mexico, South Korea, or India under applicable treaty provisions, and that most other credits, including education credits, earned income credit, and retirement savings contributions credit, are not available to nonresident aliens.
On line 54, add tax on non-effectively connected income from Schedule NEC, line 15, representing tax calculated at flat rates of 30% or applicable lower treaty rates. On line 61, calculate total tax liability by combining all tax amounts and adding any additional taxes owed, including self-employment tax, unreported social security and Medicare tax, and household employment taxes.
Step 10: Complete Schedule OI, Verify Withholding, and Attach Forms
Complete Schedule OI on page 5 by answering all questions A through L, including country or countries of citizenship or nationality during 2014, country in which you claim residence for tax purposes, type of U.S. visa held and whether immigration status changed during the year, dates of entry to and departure from the United States during 2014, number of days present in the United States during 2014, 2013, and 2012, whether engaged in U.S. trade or business during 2014, and whether claiming income tax treaty benefits.
On Item L, if claiming treaty-exempt income, complete sections (1) and (2) identifying the treaty country, applicable treaty article number, number of months the benefit was claimed in prior years, and amount of exempt income for 2014; attach Form 8833 Treaty-Based Return Position Disclosure if required by the instructions. On line 62a, enter U.S. federal income tax withheld as shown on Forms 1099. On line 62d, enter U.S. federal income tax withheld on non-effectively connected income as shown on Forms 1042-S.
On line 71, calculate total payments by combining all withholdings, estimated tax payments, and excess social security tax withholdings. File Form 1040NR by April 15, 2015, if you received wages subject to U.S. tax withholding during 2014, or by June 15, 2015, if you did not receive wages subject to U.S. withholding.
Attach all Forms W-2, all Forms 1042-S, Schedule D if capital gains or losses are reported, Schedule E if rental or partnership income is reported, Schedule C or Schedule C-EZ if business income is reported, Schedule F if farm income is reported, Form 6251 if alternative minimum tax is calculated, Form 8840 if claiming closer connection exception, Form 8833 if claiming treaty benefits, and Form 8962 if advance premium tax credit is received. Reference the IRS Where to File page for Form 1040NR 2014 to determine the correct mailing address.
Form Design Changes for 2014 Form 1040NR
Line 40 for exemptions was restructured for the 2014 tax year. The 2014 instructions clarify that nonresident aliens are not entitled to a standard deduction and must use the $3,950 personal exemption per person, subject to phase-out thresholds based on adjusted gross income. This change represents a clarification of existing rules rather than a substantive change in tax law, ensuring that taxpayers understand the exemption calculation methodology and phase-out application.
The Schedule NEC on page 4 has been updated with revised column headings for tax rates. The 2014 form explicitly provides columns (a) 10%, (b) 15%, © 30%, and (d) Other with space to specify the applicable percentage, aligning the schedule structure with treaty-rate reporting requirements and backup withholding correction procedures. This update reflects coordination between Chapter 3 withholding on payments to foreign persons and Chapter 4 withholding under the Foreign Account Tax Compliance Act provisions, ensuring accurate classification and reporting of non-effectively connected income at correct withholding rates.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
